Banks may avoid soft-loan scheme

Meanwhile, the ministry has asked Government Savings Bank (GSB) to provide enough cash to compensate flood victims, to be reimbursed by the government later.

“I would like to urge commercial banks to join the soft-loan scheme because it would also solve their own problem – risk of rising non-performing loans,” Finance Minister Thirachai Phuvanatnaranubala said after meeting with executives of state-run banks yesterday. 

Under the programme, GSB is to provide Bt20 billion to commercial banks but they will have to contribute the same amount, for a total of Bt40 billion in loans for businesses affected by flooding at 3 per cent interest annually for the first three years of the loan’s term. 

The low interest rate may make commercial banks reluctant to join the scheme, Thirachai said, adding he would closely monitor developments. 

He also urged commercial banks to join the Small Business Credit Guarantee Corp, which will guarantee loans up to Bt120 billion. The SBCG will take responsibility for the first 30 per cent of losses on non-performing loans, he said. However, banks have to charge only 3 per cent interest in the first three years of the loan’s term. 

Thirachai said he asked state banks to encourage commercial banks to join the scheme. He believed soft loans would help banks’ clients to recover their businesses and service their debts. 

GSB will also provide Bt15 billion in loans to industrial-park operators with interest at 0.01 per cent and loan terms of seven years, he said. 

The loans are aimed at supporting the construction of flood barriers and other water-management systems such as drainage, which should restore investor confidence, Thirachai said. 

The government will compensate GSB for its losses due to the low interest rate. 

Meanwhile, the GSB is bearing the cost for now of government-mandated compensation to flood victims. The Cabinet approved Bt3.1 billion for 621,355 families in Bangkok, each of which will get Bt5,000. The government will reimburse GSB later. The bank has said it has enough liquidity to support the government projects, Thirachai said. 

Some state banks have asked the Finance Ministry for fresh capital injections. Thirachai said that if they implement accounting practices to international standards, the ministry would increase their capital. 

The government expects loan packages by state and commercial banks to support households and industries affected by the flood disaster to amount to as much as Bt325 billion.